March 29, 2024

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Ernst & Young will pay a $100 million fine after auditors cheated on ethics exams

Ernst & Young will pay a $100 million fine after auditors cheated on ethics exams

Ernst & Young, one of the world’s largest audit firms, agreed to pay a $100 million fine after US securities regulators discovered that some of its auditors had cheated on ethics tests – and that the company had not done enough to stop the practice.

The penalty is the largest ever by the Securities and Exchange Commission against an audit firm. An administrative civil order filed by regulators said Ernst – also known as EY – misled investigators, withheld evidence and violated public accounting rules designed to preserve the integrity of the profession.

Grewal, the commission’s director of enforcement, in announcing the settlement on Tuesday, said, “It is simply outrageous that the professionals responsible for controlling customer fraud cheat their ethics exams of everything.”

The punishment Double the amount of KPMGanother large audit firm, pushed in 2019 to resolve an investigation into similar allegations of fraud by auditors in its internship exams.

“Nothing is more important than our integrity and our morals,” Ernst, who admitted in the matter that her behavior was wrong, said in a statement. The company also said that “sharing answers to any assessment or test is a violation of our Code of Conduct and is not tolerated” and said it would require efforts to enforce compliance with ethical rules.

Ethics tests cheated by Ernst auditors were part of the continuing education program that most states offer accountants to maintain their professional licenses, according to the commission. The SEC said the fraud involved hundreds of the company’s auditors from 2017 to 2021.

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Forty-nine Ernst auditors have been awarded an “answer key” for the ethics exam that is part of the initial process for becoming a certified public accountant, according to the SEC. Administrative order.

Regulators said this is not the first time that cheating on ethics exams has been widespread by Ernst staff. The SEC said a somewhat similar fraud scandal, which the company handled internally, occurred from 2012 to 2015.

The SEC noted, in the order, that Ernst had sent warnings in the past to employees about not cheating in exams, but it had not put in place adequate controls until recently.

As part of the settlement, the Securities and Exchange Commission asked Ernst to appoint independent advisors. One will review the company’s policies on ethical actions, and the other will review its failure to properly detect fraud.

Mr. Grewal said the settlement “should serve as a clear message that the SEC will not tolerate integrity failures by independent auditors”.